Successfully collude to fix price at profit maximizing level

Assignment Help Business Economics

Reference no: EM13800518

The demand curve for higher education in Tallahassee is P=120-2Q. Assume the only two colleges in town are FSU and FAMU. Each university faces the cost function TC=6Q. Copy the table below to your homework and fill in the blanks for the three scenarios described in a through c. Be sure to show your work for each scenario.

A. Both colleges get together and successfully collude to fix price at a profit maximizing level.

B. Both colleges assume that the other will hold the present tuition constant despite what the competition does.

C. Both colleges assume that the other will hold the present enrolment constant despite what the competition does. Additionally, for part c only, FAMU faces a new cost function TC=6Q+.25Q^2. FSU's cost function remains the same as in parts a and b.

D. Now FAMU assumes FSU will hold enrolment fixed, and FSU knows that FAMU is expecting this. Both have the same cost curve again, as in parts a and b.

E. For parts a through d, state the oligopoly model under which each scenario is analyzed.

Reference no: EM13800518

Questions Cloud

Applying the concept of diminishing marginal utility : The government wants to make medicare benefits available to more people, but to achieve this goal, it needs to make cuts in the existing medicare budget. The two areas where they are considering cuts are non-essential elective surgery and 6-12 month ..

Substitution and income effects of a change in price of good : Substitution and income effects of a change in price of a good may be used to explain the:

Submitted bids to develop a new video display technology : Two competing companies have submitted bids to develop a new video display technology. The yearly development cost of Alpha expressed in actual dollars will be $150,000 the first year and increase by 4% per year over the five year contract. Beta has ..

Determine apples optimal output : Consider the market for music downloads. The market demand curve is given by P=10-(1/6)Q. Where Q is the number of downloads sold per hour and P is the price per download. Apple is the dominant firm in this market with constant marginal costs MC=6.

Successfully collude to fix price at profit maximizing level : The demand curve for higher education in Tallahassee is P=120-2Q. Assume the only two colleges in town are FSU and FAMU. Each university faces the cost function TC=6Q. Both colleges get together and successfully collude to fix price at a profit maxim..

Transactions involving interest include which of elements : Transactions involving interest include which of these elements?

If a price is above equilibrium : If a price is above equilibrium,

Preferred customer and the customer is charged at cost : An apparel manufacturing plant has estimated the variable cost to be $4.50 per unit. Fixed costs are $500,000 per year. Forty percent of its business is with one preferred customer and the customer is charged at cost. If 150,000 total units are sold ..

What trade barriers were in place during that decade : What are the main goods and services the United States traded internationally? What trade barriers were in place during that decade? What are two pros and two cons of the trade barriers used?

User Account

All Pages